Bank Of England Ties Rates Rises To Unemployment

TheBank of Englandsaid on Wednesday (August 7) that it would keep interest rates at 0.5 percent unless inflation threatened to get out of control or there was a danger to financial stability.

CanadianMark Carneywho took over from the long-servingMervyn Kingas BoE governor said bank rates will not be raised until unemployment fell.

BoE policymakers said they stood ready to buy more government bonds if additional stimulus was needed and would not reverse existing purchases while unemployment was too high.

"While the unemployment rate remains above seven percent, the MPC (Monetary Policy Committee) stands ready to undertake further asset purchases is further stimulus is warranted. But until the threshold level is reached, the MPC intends not to reduce the stock of asset purchases from the current 375 billion pounds," Carney told a news conference.

"Now it's important to stress that forward guidance does not mean the MPC is promising to keep interest rates low for a particular period of time. The path of bank rates and asset purchases will as always depend on economic conditions," Carney said.

The BoE said that growth was likely to be "weak by historical standards", even though economic recovery was "taking hold" and inflation was forecast to stay above its 2 percent target until the second half of 2015 based on market rate expectations.

A growing number of major central banks are providing so-called forward guidance to help nurse their economies back to health after the damage of the financial crisis.